The Reserve Bank of India (RBI) on October 26, 2023, has increased the minimum amount for offering non-callable term deposits to Rs 1 crore from the existing Rs 15 lakh for banks. So, all customers will get an option to prematurely withdraw money from fixed deposits (FDs) of up to Rs 1 crore.
Non-callable fixed deposits refer to a category of term deposits that offer no premature withdrawal option before the completion of tenure. Once you invest in these deposits, your money will be locked for the entire tenure. You can only access the money once your FD matures.
In a notification released on October 26, 2023, the central bank said, "In terms of these instructions, banks have been permitted to offer domestic term deposits (TDs) without premature withdrawal option, provided that all TDs accepted from individuals for an amount of Rupees fifteen lakh and below shall have premature withdrawal-facility. Further, the banks have also been permitted to offer differential rate on interest on TDs based on non-callability of deposits (i.e., non-availability of premature withdrawal option) in addition to tenor and size of deposits."
"On a review, it has been decided that (i) the minimum amount for offering non-callable TDs may be increased from Rupees fifteen lakh to Rupees one crore i.e., all domestic term deposits accepted from individuals for amount of Rupees one crore and below shall have premature-withdrawal-facility and (ii) these instructions shall also be applicable for Non-Resident (External) Rupee (NRE) Deposit / Ordinary Non-Resident (NRO) Deposits," it added.
"This circular is applicable to all commercial banks and co-operative banks," the central bank said.
Banks usually offer higher interest rates on non-callable FDs
As your money is locked-in for a certain period, banks usually offer slightly higher interest rates on non-callable FDs than regular fixed deposits. For instance, SBI offers an interest rate of 7.10% on its non-callable Sarvottam FD maturing in a year. For two-year non-callable FDs, the bank offers an interest rate of 7.40%. Meanwhile, regular FD maturing in a year fetches an interest rate of 6.8%. Similarly, fixed deposits which have the option of premature withdrawal, offer an interest rate of 7%.
Bank of Baroda offers an additional interest rate of 0.25% on non-callable FDs below Rs 2 crore. For non-callable FDs of Rs 2 crore and above, the public sector bank offers an additional interest of 0.10%.
"This will help individual investor in putting their money into FD of banks which charge no penalty on premature withdrawal for amount up to Rs 1 crore. Also, the same is applicable for NRE/NRO deposits," says Abhishek Kumar, a SEBI Registered Investment Advisor (RIA) and Founder of SahajMoney.
These instructions shall come into force with immediate effect, RBI added.
RBI has also enhanced the bulk deposit limit for regional rural banks to Rs 1 crore from Rs 15 lakh. Accordingly, “bulk deposit” for regional rural banks would now mean single rupee term deposits of Rupees one crore and above, the central bank said.
FAQs
The Reserve Bank of India (RBI) on October 26, 2023, has increased the minimum amount for offering non-callable term deposits to Rs 1 crore from the existing Rs 15 lakh for banks. So, all customers will get an option to prematurely withdraw money from fixed deposits (FDs) of up to Rs 1 crore.
Can a non-callable FD be withdrawn? ›
Contrary to callable FDs, non-callable fixed deposits have a predetermined lock-in period. The amount a person invests in this product can't be withdrawn before the maturity date except in specific situations such as bankruptcy, court order, business liquidation, or the depositor's demise.
What is premature withdrawal allowed in fixed deposit? ›
Fixed deposits, with a premature withdrawal facility, allow the depositor to close the FD before the date of maturity arrives. This comes as a relief in times of cash crunch. However, a certain amount may be required to be paid by the depositor as a penalty to the bank. This usually ranges between 0.5% and 1%.
What is the RBI circular on non-callable deposits? ›
On a review, it has been decided that (i) the minimum amount for offering non-callable TDs may be increased from Rupees fifteen lakh to Rupees one crore i.e., all domestic term deposits accepted from individuals for amount of Rupees one crore and below shall have premature-withdrawal-facility and (ii) these ...
What is the penalty for premature withdrawal of FD in bank of India? ›
Penalty Charges for Premature Withdrawal of FD
This is usually 0.5% - 1.00% of the interest rate. However, some banks do not charge any penalty in case of an emergency or if you wish to invest the same amount in another investment option provided by the bank.
What is the difference between callable and non-callable FD? ›
Non-callable FDs offer higher interest rates but lack liquidity, suitable for long-term goals. Callable FDs provide flexibility with lower interest rates, more suitable for short-term strategies and unforeseen financial needs.
Is non-callable CD better than callable CD? ›
Should you buy a callable CD? It depends. If you're fine with the possibility of your CD getting called and want a higher APY, it could be a good bet. On the other hand, if you don't want to deal with the hassle of figuring out where to reinvest your money if it does get called, a traditional CD is a better choice.
What is the disadvantage of premature closure of FD? ›
In such cases, it is essential to know the financial consequences of breaking your FD.
- Closure penalties and lower interest rates. ...
- Interest rates on a new FD may not be as good as your old one. ...
- Changing FDs for a higher interest rate does not always pay. ...
- For immediate cash, it may be better to take a loan against your FD.
Online application process for breaking Fixed Deposits
Visit your lender's website. Login by entering your user ID and password and go to the service request section. Select the option prompting for 'Premature Closure of Fixed Deposits' Enter your FD number and submit a cancellation request.
How is premature FD withdrawal penalty calculated? ›
Suppose a person availed of 2 years FD of Rs 1 lakh at a rate of 6% for 2 years. He opted for withdrawal after completing the 1 year. Here the effective interest rate is lower than the booked interest rate. Therefore, banks will impose the penalty on effective FD rates, i.e., 6%-1%=5%.
What is a Non-Callable FD? Fixed deposits that are not callable have a lock-in term. Except in circ*mstances of bankruptcy, orders by, business winding up, death cases, etc., the cash invested in these deposits cannot be taken before the maturity date.
What is the minimum amount of non callable deposit? ›
All domestic term deposits accepted from individuals for amount of ₹1 crore and below shall have premature-withdrawal-facility. The Reserve Bank of India (RBI) has increased the minimum amount for offering non-callable/without premature withdrawal option term deposits (TDs) from ₹15 lakh to ₹1 crore.
What does non callable mean on a CD? ›
These words mean the bank cannot redeem the CD during the first year, but they have nothing to do with the CD's maturity date. A “one-year non-callable” CD may still have a maturity date 15 or 20 years in the future. Confirm the Interest Rate You'll Receive and How You'll. Be Paid.
What happens if I break my FD before maturity in Indian bank? ›
Yes, you will be charged a penalty fee of 1% of the total amount liable for return.
What happens if FD is broken before maturity in bank of India? ›
Closing your BoI Fixed Deposit account before maturity
The only difference will be that the bank is likely to charge you a penalty ranging between 0.5% to 1% of the total deposit amount.
Is premature withdrawal allowed for tax saver FD? ›
What is the tenure of a Tax Saver FD? A Tax Saver Fixed Deposit has a lock-in period of 5 years. No premature withdrawals, loans or overdraft facilities are available against Tax Saver FDs.
Can a non-callable bulk FD be prematurely closed? ›
Non-callable fixed deposits simply don't have any lock in period. The amount that an investor invested in this product can't be withdrawn prior to the date of maturity with the exceptions that include Bankruptcy of the account holder, winding up of business, orders by, in the case of death, etc.
Are non-callable bonds risky? ›
Non-callable bonds are favorable for the investor, as they are guaranteed a fixed interest payment even when there is volatility in the market. In some cases, a callable bond can become a non-callable bond after a certain period of time after they are issued.
What is the limit of non-callable FD? ›
The maximum non-callable FD has no limit. For NRE, deposits should be below Rs. 2 crores only.
What is the maximum deposit in non-callable FD? ›
Union Bank of India has introduced non-callable term deposit scheme. The scheme is available to the deposits of Rs. 2 Crore and above (Single Deposits) only.
